Portland computer contract runs over budget

FACTBOX

Portland's effort to buy a new computer system to
handle payroll and most other internal city business has
turned into a financial debacle on par with the skyrocketing
cost of the aerial tram and the Water Bureau's bungled
billing operations.

City administrators have reached a "transition
agreement" that ends the contract of Ariston Consulting
& Technologies, a San Diego-based company hired to
install new software and integrate it with existing
programs.

Ariston, a 30-person firm, did not show the kind of guidance
city leaders needed, said Ken Rust, the city's chief
administrative officer.

The new software program was originally estimated to cost
$31 million, including $16.9 million promised to Ariston and
millions more to pay quality-control consultants and buy the
software, new servers and other hardware. Now city analysts
expect it to cost $49.5 million.

"No one in city government had ever installed a system
like this before," Rust said. "We hired a
consulting firm to lead us through the process. Instead, we
saw a complete lack of leadership."

A lawyer for Ariston said city administrators hired Ariston
without a firm understanding of what they wanted the company
to do. The conflict will likely end up in court.

"I don't think there's a person or a bureau
or a contractor at fault," said lawyer Robert Stoll.
"I think it's going to be a while before we get
all this straightened out."

The new computer system is supposed to save Portland
taxpayers money by centralizing internal government work
such as payroll and accounting and eliminating redundancies;
a 2003 study found that city bureaucrats use more than 322
separate programs for basic business functions.

The City Council agreed to buy a new computer system four
years ago. City administrators decided to use SAP, one of
the world's most common business programs and sought a
contractor through a competitive request for proposals.

They got four responses and chose Ariston in 2006 after
several months of vetting that included reference checks and
visits to other places that had hired the contractor.
Although Ariston was smaller than other applicants, city
leaders liked that the company focused on the public sector
rather than private corporations.

Government computer systems can be more complicated than
corporate ones; the city of Portland must factor in 16
different labor contracts when calculating payroll, for
example. City officials also thought a smaller firm, with
fewer clients, would be more likely to send its best people
to Portland.

The City Council approved a $13.7 million contract with
Ariston in late 2006. But the firm's size quickly
became a problem. Last summer, a consultant hired to do
regular quality control updates told city managers that
Ariston was working too slowly and that the city and the
contractor lacked the kind of detailed plan necessary to get
the new system working on time.

City leaders responded by agreeing to pay Ariston $3.2
million more, enough to bring in more technicians.

Last December, Ariston and city staff did a test run on a
new payroll system. To their surprise, the new system did
not take into account all the complexities of
Portland's massive bureaucracy, the different ways
various bureaus measure a day's work, the many
different pay ranges and other obstacles to centralization.

Rust convened a daylong retreat Jan. 22 with project leaders
from the city's Office of Management and Finance and
Ariston. He expected Ariston to offer a solution, he said.
When the leaders did not, he began talking about firing
them.

Rust had been giving Mayor Tom Potter, his boss, monthly
updates. Potter agreed with his decision.

Today, the City Council will vote to hire SAP, the software
manufacturer, to finish the installation, including bringing
in a group of managers and technicians who successfully
implemented a similar program in Houston. Council members
will also vote on borrowing $10.5 million to pay for some of
the cost overruns.

The new system is expected to go on line in November, 10
months late. The estimated price tag has jumped $18.5
million, which includes more money for SAP to finish the
work, along with the cost of keeping other contractors on
for longer and lost hours for city staffers who were
supposed to be back on their regular jobs by now.

Rust said there's little city administrators could have
done differently. Ariston had good references and a
successful track record. The only red flag city leaders
might have noticed, he said, is that Ariston had never led a
project this large and complicated.

Ariston's president referred questions to Stoll, the
Portland lawyer, who noted that Ariston has handled several
large government contracts. That includes successful
installation work for Multnomah County.

He suggested that Portland administrators did not realize
how complicated the job was.

"Frankly, there are a lot of silos within the
city," he said. "When you try to go from the silo
system to one overall system, and nobody has looked at how
they integrate and whether they even can integrate and what
it's going to cost to integrate them, it's very
difficult for a consultant to come in and be
successful."

Portland computer contract runs over budget

FACTBOX

Portland's effort to buy a new computer system to
handle payroll and most other internal city business has
turned into a financial debacle on par with the skyrocketing
cost of the aerial tram and the Water Bureau's bungled
billing operations.

City administrators have reached a "transition
agreement" that ends the contract of Ariston Consulting
& Technologies, a San Diego-based company hired to
install new software and integrate it with existing
programs.

Ariston, a 30-person firm, did not show the kind of guidance
city leaders needed, said Ken Rust, the city's chief
administrative officer.

The new software program was originally estimated to cost
$31 million, including $16.9 million promised to Ariston and
millions more to pay quality-control consultants and buy the
software, new servers and other hardware. Now city analysts
expect it to cost $49.5 million.

"No one in city government had ever installed a system
like this before," Rust said. "We hired a
consulting firm to lead us through the process. Instead, we
saw a complete lack of leadership."

A lawyer for Ariston said city administrators hired Ariston
without a firm understanding of what they wanted the company
to do. The conflict will likely end up in court.

"I don't think there's a person or a bureau
or a contractor at fault," said lawyer Robert Stoll.
"I think it's going to be a while before we get
all this straightened out."

The new computer system is supposed to save Portland
taxpayers money by centralizing internal government work
such as payroll and accounting and eliminating redundancies;
a 2003 study found that city bureaucrats use more than 322
separate programs for basic business functions.

The City Council agreed to buy a new computer system four
years ago. City administrators decided to use SAP, one of
the world's most common business programs and sought a
contractor through a competitive request for proposals.

They got four responses and chose Ariston in 2006 after
several months of vetting that included reference checks and
visits to other places that had hired the contractor.
Although Ariston was smaller than other applicants, city
leaders liked that the company focused on the public sector
rather than private corporations.

Government computer systems can be more complicated than
corporate ones; the city of Portland must factor in 16
different labor contracts when calculating payroll, for
example. City officials also thought a smaller firm, with
fewer clients, would be more likely to send its best people
to Portland.

The City Council approved a $13.7 million contract with
Ariston in late 2006. But the firm's size quickly
became a problem. Last summer, a consultant hired to do
regular quality control updates told city managers that
Ariston was working too slowly and that the city and the
contractor lacked the kind of detailed plan necessary to get
the new system working on time.

City leaders responded by agreeing to pay Ariston $3.2
million more, enough to bring in more technicians.

Last December, Ariston and city staff did a test run on a
new payroll system. To their surprise, the new system did
not take into account all the complexities of
Portland's massive bureaucracy, the different ways
various bureaus measure a day's work, the many
different pay ranges and other obstacles to centralization.

Rust convened a daylong retreat Jan. 22 with project leaders
from the city's Office of Management and Finance and
Ariston. He expected Ariston to offer a solution, he said.
When the leaders did not, he began talking about firing
them.

Rust had been giving Mayor Tom Potter, his boss, monthly
updates. Potter agreed with his decision.

Today, the City Council will vote to hire SAP, the software
manufacturer, to finish the installation, including bringing
in a group of managers and technicians who successfully
implemented a similar program in Houston. Council members
will also vote on borrowing $10.5 million to pay for some of
the cost overruns.

The new system is expected to go on line in November, 10
months late. The estimated price tag has jumped $18.5
million, which includes more money for SAP to finish the
work, along with the cost of keeping other contractors on
for longer and lost hours for city staffers who were
supposed to be back on their regular jobs by now.

Rust said there's little city administrators could have
done differently. Ariston had good references and a
successful track record. The only red flag city leaders
might have noticed, he said, is that Ariston had never led a
project this large and complicated.

Ariston's president referred questions to Stoll, the
Portland lawyer, who noted that Ariston has handled several
large government contracts. That includes successful
installation work for Multnomah County.

He suggested that Portland administrators did not realize
how complicated the job was.

"Frankly, there are a lot of silos within the
city," he said. "When you try to go from the silo
system to one overall system, and nobody has looked at how
they integrate and whether they even can integrate and what
it's going to cost to integrate them, it's very
difficult for a consultant to come in and be
successful."